Silvaco Group, Inc.

(Unaudited)

1. Description of Business

Silvaco Group, Inc. (“Silvaco,” and the “Company” refers to Silvaco Group Inc. and its subsidiaries, unless the context specifically requires otherwise) was incorporated as a Delaware corporation on November 18, 2009. The Company is a provider of technology computer aided design (“TCAD”) software, electronic data automation (“EDA”) software and semiconductor intellectual property (“SIP”). TCAD, EDA and SIP solutions enable semiconductor and photonics companies to increase productivity, accelerate their products’ time-to-market and reduce their development and manufacturing costs. The Company has decades of expertise developing the “technology behind the chip” and providing solutions that span from atoms to systems, starting with providing software for the atomic level simulation of semiconductor and photonics material for devices, to providing software and SIP for the design and analysis of circuits and system level solutions. The Company provides SIP for system-on-a-chip (“SoC”), integrated circuits (“ICs”) and SIP management tools to enable team collaborations on complex SoC designs. The Company’s customers include semiconductor manufacturers, original equipment manufacturers (“OEMs”) and design teams who deploy the Company’s solutions in production flows across the Company’s target markets, including display, power devices, automotive, memory, high performance computing (“HPC”), internet of things (“IoT”) and 5G/6G mobile markets.

2. Summary of Significant Accounting and Reporting Policies

Basis of presentation and consolidation

The accompanying condensed consolidated financial statements have been prepared in accordance with U.S. Generally Accepted Accounting Principles ("GAAP") and include the accounts of Silvaco and all of the Company's wholly owned subsidiaries with operations in North America, Europe, Asia and South America. All intercompany transactions and balances have been eliminated upon consolidation.

The condensed consolidated financial statements as of March 31, 2025 and for the three months ended March 31, 2025 and 2024 are unaudited. Certain information and footnote disclosures normally included in annual financial statements prepared in accordance with GAAP have been omitted from these condensed consolidated financial statements, as permitted by Securities and Exchange Commission (“SEC”) rules and regulations. Accordingly, these condensed consolidated financial statements should be read in conjunction with the Company’s audited consolidated financial statements for the year ended December 31, 2024 and the related notes thereto included in the Company’s Annual Report on Form 10-K filed with the SEC on March 5, 2025. The condensed consolidated balance sheet as of December 31, 2024 was derived from the audited consolidated financial statements as of that date. In management’s opinion, the condensed consolidated financial statements have been prepared on the same basis as the annual financial statements and reflect all adjustments, which include only normal recurring adjustments necessary for the fair statement of the condensed consolidated financial statements.

The results of operations for the three months ended March 31, 2025 are not necessarily indicative of the Company’s operating results to be expected for the full fiscal year or any other future interim or annual period.

Emerging growth company status

The Company is an emerging growth company as defined in the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”). Under the JOBS Act, emerging growth companies can delay adopting new or revised accounting standards issued subsequent to the enactment of the JOBS Act, until such time as those standards apply to private companies. The Company has elected to use this extended transition period for complying with new or revised accounting standards that have different effective dates for public and private companies until the earlier of the date that the Company (i) is no longer an emerging growth company or (ii) affirmatively and irrevocably opts out of the extended transition period provided in the JOBS Act.

Use of estimates

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements. Estimates also affect the amounts of revenue and expenses during the reported periods. The Company’s most significant estimates relate to revenue recognition. Other estimates include, but are not limited to, accounts receivable allowances, stock-based compensation expense, valuation of goodwill and other intangible assets, contingent consideration, derivative valuations, uncertain tax positions, legal contingencies and income taxes. Actual results could differ from those estimates.

Concentrations of credit risk

Accounts receivable from customers representing 10% or more of the Company’s total accounts receivable were as follows:

• Customer accounted for less than 10% of total accounts receivable at period end.

Revenue from customers representing 10% or more of the Company’s total revenue was as follows:

• Customer accounted for less than 10% of total revenue during the period.

In addition to the concentration of credit risk with respect to trade receivables and revenue, the Company's cash on deposit with financial institutions is also exposed to concentration risk. The Company's cash on deposit with financial institutions is insured through various public and private bank deposit insurance programs, foreign and domestic; however, a significant portion of cash balances held as of March 31, 2025 and December 31, 2024 exceeded insured limits.

As of March 31, 2025, $4.1 million, or 14%, of the Company’s cash and cash equivalents was maintained with one financial institution, where the Company’s current deposits are in excess of federally insured limits, and $6.2 million, or 21%, was held by the Company’s foreign subsidiaries.

Accumulated other comprehensive loss

Accumulated other comprehensive loss is composed of foreign currency translation adjustments and unrealized gains and losses on marketable securities.

Foreign currencies

The financial statements of Silvaco's international subsidiaries with local functional currencies are translated to U.S. dollars upon consolidation. Assets and liabilities are translated at the effective exchange rate on the balance sheet date. Results of operations are translated at average exchange rates, which approximate rates in effect when the underlying transactions occur. The Company recorded foreign currency translation adjustments of $0.3 million and $(0.2) million for the three months ended March 31, 2025 and 2024, respectively, within accumulated other comprehensive loss.

Certain of the Company’s sales and intercompany transactions are denominated in foreign currencies. These transactions are recorded in functional currency at the appropriate exchange rate on the transaction date. Monetary assets and liabilities denominated in a currency other than the Company's functional currency or its subsidiaries' functional currencies are remeasured at the effective exchange rate on the balance sheet date. Gains and losses resulting from foreign exchange transactions are included in interest and other expense, net in the Company’s condensed consolidated statements of (loss) income. The Company recorded net foreign exchange transaction losses of $0.2 million and $0.1 million for the three months ended March 31, 2025 and 2024, respectively.

Net (loss) income per share

Basic net (loss) income per share is computed based on the weighted average number of shares of common stock outstanding. Diluted net (loss) income per share is computed based on the weighted average number of common shares outstanding increased by dilutive common stock equivalents attributable to RSU grants.

The following outstanding securities were excluded from the computation of diluted net (loss) income per share because (i) the effect would be anti-dilutive for the three months ended March 31, 2025, and (ii) the securities were contingent upon conditions for issuance which were not satisfied as of March 31, 2024. See Note 8, Stock-based Compensation for additional information.

Accounting guidance issued and not yet adopted

In December 2023, the FASB issued ASU No. 2023-09, Income Taxes (Topic 740): Improvement to Income Tax Disclosures to enhance the transparency and decision usefulness of income tax disclosures. This ASU is effective for annual periods beginning after December 15, 2024, on a prospective basis. Early adoption is permitted. The Company is currently evaluating the impact of this accounting standard update on the condensed consolidated financial statements.

In November 2024, the FASB issued ASU No. 2024-03, Income Statement – Reporting Comprehensive Income – Expense Disaggregation Disclosures (Topic 220): Disaggregation of Income Statement Expenses. This ASU requires additional disclosure of certain amounts included in the expense captions presented on the statements of (loss) income as well as disclosures about selling expenses. This ASU is effective on a prospective basis, with the option for retrospective application, for annual periods beginning after December 15, 2026 and interim reporting periods beginning after December 15, 2027. Early adoption is permitted. The Company is currently evaluating the impact of this accounting standard update on the condensed consolidated financial statements.

3. Revenue

The Company's revenue is derived principally from contracts which promise to deliver combinations of software licensing and related maintenance and services, which are accounted for as separate performance obligations with differing revenue recognition patterns. The transaction price is allocated to each distinct performance obligation based on the relative standalone selling price. Software license revenue consists of the Company’s software sold under a software license and is generally recognized upon shipment and delivery of license keys. Maintenance and service revenue consists of both maintenance revenues, which is recognized ratably over the term of the arrangement, and professional services revenues which is recognized based on when the Company delivers the related service pursuant to the terms of the arrangement.

Customer contracts

The Company accounts for a contract with a customer when both parties have approved the contract and are committed to perform their respective obligations, each party’s rights and payment terms can be identified, the contract has commercial substance, and it is probable the Company will collect substantially all of the consideration it is entitled to. Revenue is recognized when, or as, performance obligations are satisfied by transferring control of a promised software or providing service to a customer.

For multi-year software licenses, the Company generally invoices customers annually at the beginning of each annual coverage period.

Transaction price allocated to the remaining performance obligations

As of March 31, 2025, approximately $33.7 million of revenue is expected to be recognized from remaining performance obligations. Revenue allocated to remaining performance obligations represents contracted revenue that has not yet been recognized, which includes both deferred revenue and backlog. The Company's backlog represents installment billings for periods beyond the current billing cycle. The Company expects to recognize revenue on approximately 45% of these remaining performance obligations over the next 12 months, with the remaining balance recognized thereafter.

Deferred revenue

Deferred revenue is comprised mainly of unearned revenue related to maintenance and service on software licenses and pending software license deliveries. Deferred revenue also includes contracts for professional services to be performed in the future.

During the three months ended March 31, 2025, the Company recognized revenue of $2.5 million that was included in the total deferred revenue balance as of December 31, 2024. All other activity in deferred revenue is due to the timing of invoices in relation to the timing of revenue recognized during the three months ended March 31, 2025, as described above.

4. Acquisitions

Optical Proximity Correction Suite of Tools

On March 4, 2025, the Company consummated an asset purchase agreement with Cadence Design Systems, Inc. (“Cadence”), pursuant to which, among other things, Silvaco agreed to acquire certain assets and assume certain liabilities comprising Cadence’s Process Proximity Compensation product line, an optical proximity correction (“OPC”) suite of tools, in exchange for $11.5 million in cash.

The acquisition was accounted for as a business combination, and Silvaco recorded the assets acquired and liabilities assumed based on their estimated fair values at the date of the acquisition. Silvaco recorded the excess of consideration transferred over the aggregate fair values of acquired assets and assumed liabilities as goodwill. The goodwill recorded was primarily attributable to synergies expected to arise after the acquisition and the value of the acquired workforce, and is expected to be deductible for U.S. income tax purposes. The Company expects that the addition of the OPC suite of tools and expert team, which are complementary to Silvaco’s EDA and TCAD suite, will enhance Silvaco’s ability to offer advanced computational lithography solutions that address the increasing complexity of semiconductor manufacturing at advanced nodes.

The following is a summary of the assets acquired and liabilities assumed in the OPC acquisition.

The fair value of developed technology was determined using a discounted cash flow model through application of the income approach, using the relief-from-royalty method, which assumed a market-based royalty rate applied to projected revenue. The fair value of customer relationships was determined using a discounted cash flow model under the income approach, specifically the multi-period excess earnings method, which discounts future cash flows attributable to existing customers, net of operating expenses and contributory asset charges.

During the three months ended March 31, 2025, the Company incurred $0.7 million in acquisition-related expenses, recognized as general and administrative expense on the condensed consolidated statements of (loss) income.

The operating results of OPC have been included in the Company's condensed consolidated financial statements since the date of acquisition and were not material for the period presented. Pro forma results of operations have not been presented because the effects of this acquisition were not material to the Company's condensed consolidated financial results.

5. Goodwill and Intangible Assets

During the three months ended March 31, 2025, the Company acquired OPC, which resulted in an increase to goodwill of $5.3 million. Refer to Note 4, Acquisitions, for further information.

As of March 31, 2025 and December 31, 2024, intangible assets were classified as follows:

Amortization expense for intangible assets was $0.4 million during the three months ended March 31, 2025, of which $0.2 million was recognized in cost of revenue as the licensed IP relates to recognized sales, with the remainder recognized in research and development expense in the Company’s condensed consolidated statements of (loss) income. Amortization expense for intangible assets was $0.1 million during the three months ended March 31, 2024, all of which was recognized in research and development expense in the Company’s condensed consolidated statements of (loss) income.

As of January 1, 2025, the Company removed the carrying value of $0.1 million of fully amortized intangible assets which at time of removal had $0 net book value.

As of March 31, 2025, estimated future amortization expense for the intangible assets reflected above was as follows:

6. Related Parties

The Company has a commercial lease agreement with Kipee International, Inc., a related party controlled by Katherine Ngai-Pesic, who is the Company's founding principal stockholder and chairperson of the Board of Directors, for Silvaco's corporate office in Santa Clara, California. In connection with this lease arrangement, the Company recorded rent expense of $0.1 million during each of the three months ended March 31, 2025 and 2024. The Company's original three year commercial office lease for this property commenced on May 1, 2022, and expired on April 30, 2025. The Company and Kipee International entered into a new commercial lease agreement, effective as of May 1, 2025, for a three year period ending on April 30, 2028.

The Company hastwo international office leases with New Horizons (Cambridge) LTD (“NHC”) and New Horizons France (“NHF”) in Cambridgeshire, England and Grenoble, France, respectively. NHC and NHF are real estate entities owned and controlled by Ms. Ngai-Pesic. In connection with these lease arrangements, the Company recorded rent expense of $0.1 million during each of the three months ended March 31, 2025 and 2024. The Company's right-of-use asset and operating lease liability under the NHC lease, which expires on December 31, 2029, is $0.9 million as of March 31, 2025. The Company's right-of-use asset and operating lease liability under the NHF lease, which expires on April 30, 2026, is $0.1 million as of March 31, 2025.

On June 13, 2022, Silvaco entered into a $4.0 million line of credit with Ms. Ngai-Pesic (the “2022 Credit Line”). In connection with this line of credit, the Company recorded interest expense of $0.1 million during the three months ended March 31, 2024. The outstanding amounts due under the 2022 Credit Line were repaid in full and the 2022 Credit Line was terminated in May 2024.

7. Debt and Financing Obligations

In December 2023, the Company entered into a loan facility with East West Bank (the “East West Bank Loan”) which had a maturity date of December 14, 2025 and provided for borrowings of up to $5.0 million bearing interest at a per annum rate equal to one half of one percent (0.5%) above the greater of (i) the prime rate or (ii) four and one half percent (4.5%). The Company drew $4.3 million and recorded interest expense of $0.1 million on the East West Bank Loan during the three months ended March 31, 2024. In May 2024, the $4.3 million was repaid in full and the East West Bank Loan was terminated.

On April 11, 2024, the Company amended its license to use, perform, display, copy, reproduce, modify, adapt, alter, customize, translate or otherwise create derivative works based on certain technology of NXP Semiconductors Netherlands B.V. to develop and make licensed designs for the Company’s account, and to market, demonstrate, promote, sell, offer to sell, distribute and otherwise dispose of such licensed designs for total cash consideration of $6.0 million, to be paid over 5 years, pursuant to which the Company recorded an associated vendor financing obligation, which has a balance of $4.2 million as of March 31, 2025. The Company determined that this vendor financing obligation had an imputed interest rate of 9%, which is reflective of its borrowing rate with similar terms to that of the license agreement, and recognized interest expense of $0.1 million for the three months ended March 31, 2025. The Company’s vendor financing obligation is comprised of the following payments as of March 31, 2025: